Insurers struggle in downturn as Senators consider adding new tax

Jul 30 2009

"Earnings from the nation's big health insurers show signs of a new uptick in medical costs related to the recession: As unemployment rises, people who have lost their jobs or are fearful of losing them are rushing to see doctors to get medical tests before their benefits expire," the Wall Street Journal reports.

WellPoint, the nation's largest insurer by volume, reported a 7.6 percent dip in profits and the loss of 338,000 members in the second quarter, further illuminating the trend. Other insurers have experienced similar patterns in which policyholders are seeking more - and more expensive - health services.

The trend is emerging as Congress seeks to pay for a major overhaul of the health system, which would include "wringing" more system-wide savings from insurers and other health industries. The development illuminates "the difficulty of such a quest," the Journal reports (Fuhrmans and Johnson, 7/30).

One plan to achieve the goal is to levy a tax on insurers' high-priced plans. "The insurers' tax idea has emerged in the Senate Finance Committee, where chairman Max Baucus said it is gaining momentum to become part of the healthcare plan being developed behind closed doors," Reuters reports. "Imposing a tax on insurance plans with premiums above $25,000 a year could raise about $90 billion over 10 years" (Frank, 7/29).

"Some people have very generous health insurance plans," Len Burman, of the Urban Institute's Tax Policy Center, told National Public Radio. "[T]hey encourage them to spend more on medical care than they would if they had less generous plans. So part of the idea is that if you limited the tax benefits for the very generous health insurance plans, people would spend less and that would actually help lower health costs overall" (Shapiro, 7/30).